Daikin Industries,Ltd.

Daikin said Q1 net sales and operating profit increased in real terms excluding foreign exchange effects, but it did not give a headline consolidated sales or EPS figure in the remarks. Operating profit margin was 10% in Q1, above internal plan. The direct operating profit impact from US tariffs was about JPY7.5 billion in Q1, and management said this was offset by about JPY5 billion of selling price increases and about JPY2.5 billion of cost reductions. On the regional/segment side, air conditioning sales in real terms excluding FX were 102% in Europe, 93% in China, 104% in the Americas, and 90% in Asia; chemicals were 115% in the Americas, 95% in China, and 99% in Europe. For the full year, management reiterated an annual operating profit plan of JPY435 billion and said it aims to exceed that plan; it also said the previously announced JPY47 billion tariff impact is now expected to be smaller than initially feared.

Koichi Takahashi said the company is shifting toward more profit-oriented management after a period where sales growth may have been prioritized too much. He emphasized higher-margin products, stricter price discipline, and company-wide cost reduction, saying awareness of earnings has already taken root more than expected in Q1. He also said Daikin still intends to pursue medium- to long-term growth, but with more focus on profitability and capital efficiency, including stronger attention to ROE.

Takahashi said Q1 profit beat plan despite sales missing plan slightly, because gross margins in both commercial and residential air conditioners were better than planned and DNA also exceeded gross profit expectations. He highlighted the tariff response: the JPY7.5 billion direct operating profit hit in Q1 was fully absorbed, and the full-year tariff burden once estimated at JPY47 billion should now be lower due to changing tariff rules and the possibility of further price increases. He also said inventory was only slightly higher in real terms than a year earlier, with increases mainly in Asia, chemicals in the US, and DNA, while Europe and China were being adjusted down; he did not indicate inventory was a major company-wide problem. Capital spending, depreciation, and R&D were said to be proceeding as planned, with annual plans unchanged.

Analysts focused heavily on the US residential HVAC market, asking whether Daikin’s Win-Back and R32/R454B dynamics were enough to support the annual plan. Management said the R454B supply shortage helped early in Q1 but had largely resolved by quarter-end, and that Daikin now expects to rely more on dealer visits, R32’s supply stability, and continued market-share gains rather than that temporary tailwind. Questions also centered on elevated distributor inventories of R410A products; Takahashi said no new R410A supply is being made, inventory should approach almost zero by end-September or later, and the company hopes the issue will be largely behind it by end-Q2. On profitability, management acknowledged investor criticism of falling margins and said the company is now tightening price discipline and ROE focus rather than chasing low-price volume.